The flowers aren’t the only thing that bloom this spring. The spring season is most always a popular and productive time in the housing market, but inventory is scarce at the moment, mortgage rates are higher than normal, and the most recent tax cut hasn’t been so favorable to the housing market as a whole just yet. It’s left a lot of buyers and sellers wondering if they should just sit out spring 2018 and await a more favorable market. Others are fearing even higher interest rates and sale prices and are anxious to know whether now is the time to jump off the indecision fence.
Whether you’re considering buying or selling a home this season, the most important factor is to not be in a rush. You’ll want to carefully consider multiple factors to make the best decision for your unique situation. Here’s what you can expect in the spring 2018 housing market and the factors you should strongly consider in making buying and selling decisions.
1. High Demand
The market is on track to have an imbalanced supply verses demand, with demand being the higher of the two. When supply is high, sellers have more leeway to leave shabby rooms unpainted, ignore cosmetic imperfections, and leisurely go about gathering their documents. Likewise, buyers can make low-ball offers and have a much greater chance of having a buyer accept it when supply is high.
High demand moots this blasé approach. The market is so competitive that buyers have a hard time making reasonable offers stand out and often have to come up with significant down payments to be competitive for high-demand property types. REMAX realtor Kevin Deselms does encourage buyers not to despair if they don’t have large down payments, however, because most newbie home buyers generally don’t have significant cash (20% down) to put forward. If you do, then you’re just a step ahead of the competition, not out of the game.
On the seller’s side, homeowners can stand out from the competition by offering homes that are ready to go and do not need a lot of repairs or renovations to appeal to the mass market of homebuyers. While DIY and renovation shows are popular shows for people to watch, it’s often much less appealing when they actually physically walk into a home in need of repairs and renovations and know that they are the ones who are going to incur the real life costs, time, and effort to complete it all.
Buyers need that push to get off the fence, and homes with pricy renovations already completed can be just that push. Spring buyers are holding out for their ideal homes. They’ve likely been patiently waiting through the slow winter season, possibly weeding out the undesirables, and are now looking to pounce when they see the right home, at the right price, with all the right boxes checked.
2. New Tax Law Implications
Changes from the newest mortgage tax law are huge influencers, especially in certain regional housing markets. This new tax law changed the deductible mortgage interest amount. However, homeowner’s could deduct interest if a mortgage was a million or less. Today, the limit is $750,000 to deduct the mortgage interest.
In some regional housing markets with lower median price ranges, the new tax law won’t have a huge impact. But, for others, such as California, New York, Boston, D.C., and other big metros, just a starter home is often priced over $750,000. Some buyers count on deducting the mortgage interest in order to be able to afford owning a home. If you fall into that category, then it may be more prudent to wait out the market for lower price points.
3. Elevating Interest Rates
Interest rates may not be at their most attractive, but you have to consider the future expectations. If they were expected to go down or only get a slight elevation bump, then waiting to buy and sell might not be that big of a deal. However, we are expected to see two more raises in rates before the end of 2018 and then three more in 2019.
Interest raises like those raise the overall purchase price, mortgage payment amounts, and down payments lenders require for security. It can even make the difference in a potential buyer qualifying for a loan. Buyers are hit from both angles – limited inventory drives pricing demand up and creates an environment of high home values, regardless of interest rate contingencies.
The bottom line when both caveats exist is an environment making housing less affordable to buyers and harder to get off the market for sellers. From the buyers angle, you get less house for more money.
Most real estate and financial experts in the market agree that, with 30-year 5% fixed notes in the very near future, now is the time for confident buyers to act if they find a home that checks off their wants and needs. Waiting can result in around $14 more per month on every eighth of a point interest on a $200,000 loan.
In closing, these three simple tips can help you decide if you should continue waiting or buy/sell a home in the 2018 housing market. But, the absolute, most fundamental rule is that you should never rush into either. Make sure that you can afford the home, regardless of market predictions for the future. This is likely the largest asset and investment of your lifetime, and buying it before you’re financially prepared most always spells doom.
